The Potential Vulnerability Of Reserved Powers Trusts

Trusts are commonly used for asset protection, however the popularity of revocable trusts and reserved powers trusts has led to a tendency to draft trust deeds with extensive powers reserved to the settlor or some other person to ensure that an element of control over the trust is retained.

In a recent article for Trusts & Trustees, Cayman Islands counsel Chris Duncan looks at some of the key decisions where the use of reserved powers resulted in a loss of the asset protection their trusts sought to achieve, highlighting the risks to trust structures in utilising reserved powers, and offers some practical guidance on how those risks might be mitigated when forming a new structure or dealing with existing structures where extensive powers have been reserved.